Grcic warns HDZ’s promise to reduce VAT fiscally unsustainable


Deputy Prime Minister Branko Grcic said on Monday that the Croatian Democratic Union’s (HDZ) announcement that it would reduce salaries for state officials and the Value Added Tax (VAT) rate while increasing the expenditure side of the budget was financially and fiscally unsustainable and would result in the fiscal system collapsing.

Speaking to reporters on the occasion of marking the 140th anniversary of official statistics in Croatia, Grcic referred to the HDZ’s recent announcements that if it came to power, it would reduce salaries for state officials by 25% to 30% as “pure demagogy.”

“The government has reduced salaries for state officials on two occasions and did not raise them when salaries for more than a million citizens went up nine and a half months ago. We are in a situation where an assistant minister’s salary is but a few kuna higher than that of a department head. Any further adjustment would mean the collapse of the entire system because the proposal refers to reducing salaries for state officials but not for civil servants. That would completely distort the entire system,” Grcic said.

He referred to the proposal as a typical election gimmick “as is the announcement to reduce VAT by 5 percentage points in the next term.”

“That would be an enormous expense for the state budget and it would be practically irrecoverable in the same period. That is around HRK 23 billion plus all the measures they plan will increase the expenditure side, so I ask my colleagues in the opposition to tell the public where they will find such huge amounts to compensate (for the reductions). What will they cut, will they cut pensions, health contributions or make other cuts they referred to earlier but are no longer mentioning?” he said.